ERICSSON 'PROFIT WARNING' CASTS SHADOW OVER TELECOMS SECTOR.

The surprise announcement by the Swedish telecommunications group Ericsson on December 10 that it was lowering its profit forecasts for 1998, caused the value of company shares to plummet, pulling down the value of other giants such as Alcatel and Nokia with it. Ericsson also announced plans for "substantial" job cuts that may affect as many as 10,000 posts. The telecommunications sector had already suffered a seismic shock on September 17, when Alcatel became the first group to announce that it was anticipating a downturn in performance over 1998, in an unfavourable climate marked by falling orders from leading operators in Europe and financial crisis in Asia and Russia. This announcement led to a 38% slump in the value of Alcatel shares in a single session, an unprecedented drop on the Paris stock exchange. Other groups were also affected with analysts wary of the entire sector, owing to the general slowdown of the global economy.

On December 10, Ericsson Chairman Sven-Christer Nilsson declared that company profits would be lower than initially forecast. The new estimates take account of the...